Cushman & Wakefield reports that more than 10% of UK shops are now available to let or vacant, with sharp differences between regions.
As of February 1, the company’s Retail Availability survey shows 10.7% vacancies overall, up 0.4 percentage points from the previous quarter, when temporary lettings before Christmas boosted the results. However, this latest figure is well below the August 2009 peak of 12.6%.
London remains the most polarised regional market, with availability in the centre of the capital at 7.9% while the suburbs recorded the highest regional figure, at 17.4%. Outer London now has the highest percentage of shop units linked to administration at 5.75%, an increase of 0.4% points in the past three months. Many regional centres in outer London have also been affected by the opening of Westfield London and the expansion and improved retail offering of Brent Cross, Cushman & Wakefield notes.
While prime, high-profile shopping streets in Central London appear immune from the pressures seen elsewhere, more secondary areas continue to suffer. Cushman & Wakefield describes this as a “flight to quality and dominance”.
Overall, the Midlands has seen the highest increase in availability, rising 1.7 points to now stand at 12.1%. Birmingham still has the highest availability in the region, with Nottingham the lowest at 8.7%. This region does, however, have among the lowest vacancy rates in the UK linked to retailer administrations, which Cushman & Wakefield says is evidence that it has now seen the worst impact of the recession on its central retail area.
Liberty International, the UK’s largest shopping centre operator, has announced plans to separate its retail operations from the rest of its commercial property business, with both companies to trade on the London Stock Exchange.
The group says the move will improve shareholder value. Chairman Patrick Burgess said the demerger was in response “to what the Liberty International board considers to be a changing approach to investment in real estate, both in the equity markets and in the property market, requiring greater focus and more active management.”
The demerger will put CEO David Fischel in charge of the Capital Shopping Centres Group (CSC) with a £5bn portfolio, while Ian Hawksworth will head the Capital & Counties Properties (C&C) group with a portfolio of £1.24bn. CSC will remain a tax-efficient REIT while C&C, which will be mainly focused on Central London, will be a non-REIT property company. The split is expected to take place in May after a shareholders’ meeting in April.
Liberty International today reported weaker than expected results for 2009 with NAV falling to 464p per share at the end of December last year, from 745p a year earlier. The recession has hit the retail sector hard and this is the group’s key tenant base. Underlying earnings excluding valuations declined to £91m from £105m a year earlier.
Andrew Jones, who previously ran the £5bn retail property portfolio at British Land, is heading up a new company called Metric Property that has plans to float on the London Stock Exchange in a £150m IPO.
Metric Property is hoping to take advantage of the downturn in retail property values in the UK and says its plans have attracted strong interest.
Jones will be working alongside Valentine Beresford and Mark Stirling, who were also previously at British Land. He said he is currently seeing a lot more opportunities for acquisitions than at the end of 2009, and added that the pressures of refinancing had “turned reluctant vendors into motivated ones”.
After a slower than expected start to 2010, the CB Richard Ellis Monthly Index for commercial property showed an acceleration in capital growth for February. Capital values rose by 1.4% last month, producing total returns for All Property of 2.0%.
The best performing sector in February was Central London offices, with total returns of 2.6% and capital growth of 2.1%. Shopping centres also did well, with total returns of 2.4% and capital growth of 1.8%. CB Richard Ellis says this sector is finally enjoying some catch-up after a very weak 2009.
Overall, rental values continued to decline, with an All Property fall of 0.2% suggesting that occupier markets remain under pressure, the group says. However, the flat rental growth reported for Central London offices in February indicates that occupier demand in the capital is stronger.
Nick Parker, CB Richard Ellis economics and forecasting analyst, commented: “Whilst it was prime yields that came back in most aggressively in the latter half of last year, it is the better secondary markets that are slowly starting to attract interest at the beginning of 2010, with investors beginning to look further up the risk curve in a hunt for better returns. It is widely expected that the yield gap between prime and secondary property will slowly narrow over 2010 as competition for good secondary assets becomes more heated.”
At the BCSC Shopping Centre Management Conference being held this week, speakers have referred to a range of reasons for caution about the short-term outlook for retail property in the UK. However, they have also stated their belief that brighter horizons (the title of the property forum) are not far off, with better times expected in 2011.
At the Bournemouth event, Professor Joshua Bamfield, director of the Centre for Retail Research, predicted slow and steady sales value growth in 2010 overall, but accelerating growth in 2011, reaching 3.4% for the year. He also expects Christmas 2010 to be good for the retail sector, pointing to high personal savings rates in the UK and an improving housing market.
If you are seeking retail premises for sale or to let, or are looking to market your retail properties, then contact Chris at Novaloca.com on 01767 313 380.
London’s famous Liberty department store building has reportedly been put up for sale. Knight Frank has been appointed as agent and has placed a price-tag of £40m on the Tudor-style landmark, according to press reports. The building is sited just off Oxford Street in one of Central London’s key retail areas.
The retailer is expected to lease the building from the new owner if the building’s freehold is indeed sold by majority owner MWB Group Holdings.
The latest research from Cushman & Wakefield suggests that while average retail property rents continued to fall in 2009, the pace of decline is slowing and some stabilisation can be expected this year.
In the final quarter of last year rents dipped a further 1% overall, although London bucked the trend with Bond Street rents topping out at 9.7% growth. The continued influx of newcomers to the capital and the limited supply of high-quality retail space available to let has kept rental rates high in the West End and in other parts of central London. The weaker pound has also boosted tourist shopping levels.
Cushman & Wakefield’s research shows that while occupier activity increased towards the year-end, availability remained at just over 10%, compared with 12% in October. Remember that temporary lettings in the run-up to Christmas may have boosted that figure. The survey also shows that landlords are agreeing healthier incentive packages to achieve lettings, which has helped activity levels as there are now some good deals around.
So if you are seeking retail space to let or for sale and want to find out how Novaloca can make your life easier, contact us on 0844 3575 260.
Writing in today’s Liverpool Daily Post, Stephen Robertson, director-general of the British Retail Consortium, issues a plea for better care of our High Streets. He points out that while 12% of retail space for sale or to let is vacant across the UK, in Liverpool the figure is 17%, and calls for better economic management of our retail centres.
Meanwhile, on a larger scale, two global shopping-mall groups are in the news this week. Simon Property Group, the largest US property company, yesterday launched a hostile US$10bn bid for its troubled rival General Growth Properties, which filed for Chapter 11 bankruptcy protection last year. This is the shopping mall giant’s second attempt at an acquisition in just three months – in December it offered US$700m to buy more than 60 outlet shopping centres from another competitor, Prime Outlets Acquisition Co. Simon Property is clearly taking advantage of current depressed valuations for retail properties in the States to use its cash pile for acquisitive growth – and it may not be the only one. Market watchers think there may be other bidders for General Growth, including REITs that also have good cash cushions.
Australia-headquartered global shopping mall group Westfield has reported a net loss of A$457.8m for 2009, after property revaluations of A$3.54bn. In 2008 the group’s net loss was A$2.2bn. The group said its operations in the UK had stabilised during the second half of the year, along with its interests in the US and New Zealand, while its Australian operations produced a strong performance. The £1.45bn development at Stratford in East London is one of Westfield’s two major global projects currently underway – the other being in Sydney. The group reported “excellent progress” at Stratford, the gateway to the 2010 Olympics, with more than 50% of the project now leased or committed.
Up to one in five shops lies empty across Kent, the Midlands and the North East. This is the downbeat finding of the latest Local Data Company (LDC) report, which shows that vacancies have continued to rise during the past two quarters – although the rate of increase is slowing.
Data for July-December 2009 show that 12.4% of shops were empty across Great Britain, compared with 10% in June 2009. This followed a 100% jump in vacancies during the first half of 2009.
The LDC has surveyed more than 700 town centres and concludes that overall shop vacancy has nearly doubled in England and Wales since 2008. Vacancy rates vary between regions, with the rate for the North East at 14% while the average figure for the South East (including London) is 9%.
Among individual locations, the survey identifies Wolverhampton as the worst-hit large retail centre, with 23.9% of its shops empty, followed by Bradford, Middlesborough and Sheffield. Among mid-sized towns Margate tops the list with a vacancy rate of 27.2%. Central London has fared much better and centres on the edges of Greater London are also improving, with vacancy rates back down below 10%.
The British Property Federation, in response to this data, is calling for government measures to make it easier to convert shops and help in the “fundamental reshaping of high streets” that is underway as people do more and more of their shopping online.
Recent figures from the retail sector suggest that there may be some levelling out of the downturn in rents and activity, but the latest report from the BCSC shows that considerable pressure remains in some areas. The BCSC says that its research, undertaken by DTZ, shows that one in five of the UK’s shopping centres is at risk of defaulting on its loans. The centres most at risk are secondary or tertiary retail centres – the report highlights the growing difference between the performance of these sites and prime retail properties.
Meanwhile, retail sector data from Cushman & Wakefield shows that while rents have continued to fall, the rate of decline has started to slow. Property Week reports that activity levels have been boosted by landlords offering incentives to achieve lettings, although there may also have been a temporary improvement thanks to short-term lets over the Christmas period. London retail property rental levels have benefited from a shortage of good-quality space, particularly in the West End, although less tourist-driven areas have seen availability increase.
Liberty to demerge malls operations
Liberty International, the UK’s largest shopping centre operator, has announced plans to separate its retail operations from the rest of its commercial property business, with both companies to trade on the London Stock Exchange.
The group says the move will improve shareholder value. Chairman Patrick Burgess said the demerger was in response “to what the Liberty International board considers to be a changing approach to investment in real estate, both in the equity markets and in the property market, requiring greater focus and more active management.”
The demerger will put CEO David Fischel in charge of the Capital Shopping Centres Group (CSC) with a £5bn portfolio, while Ian Hawksworth will head the Capital & Counties Properties (C&C) group with a portfolio of £1.24bn. CSC will remain a tax-efficient REIT while C&C, which will be mainly focused on Central London, will be a non-REIT property company. The split is expected to take place in May after a shareholders’ meeting in April.
Liberty International today reported weaker than expected results for 2009 with NAV falling to 464p per share at the end of December last year, from 745p a year earlier. The recession has hit the retail sector hard and this is the group’s key tenant base. Underlying earnings excluding valuations declined to £91m from £105m a year earlier.